CSE Press Release: Petrol price hike is 'mindless'

CSE slams petrol price hike as “mindless” as it does not narrow the price gap with diesel

This is leading to gross misuse of diesel by rich car owners and massive revenue losses to the government

The government should either ban use of diesel in cars or increase price of diesel and tax on diesel cars

New Delhi, May 24, 2012: "The latest hike in petrol prices has further widened the gap between petrol and diesel, mindlessly inciting and fanning the lure for diesel cars for its cheaper run for the money. But the government is ignoring the severe public health impacts of dieselisation in Indian cities; the energy impacts of the steady shift towards bigger diesel cars and SUVs; and crippling revenue losses on account of subsidy of rich car owners" – Centre for Science and Environment (CSE) has come out with this statement slamming the petrol price rise announced recently.

Already, diesel cars are close to 50 per cent of the total new car sales in India. In the compact car segment – which is more numerous and popular -- diesel cars are already 70-75 per cent of all car sales.

Cheap diesel is not only worsening the public health risk, but also inciting more motorisation and congestion. It is a threat to energy security as well. Cheap diesel is pushing the market towards bigger cars and SUVs that guzzle more fuels, and undermines fuel efficiency advantages of small cars. In 2011, the SUV segment registered a 41 per cent growth – a trend that is all set to explode.

Fuel tax differential has always been officially justified in the name of agriculture and freight. But rich car owners have benefited more from it. Cars have already become the second biggest user of diesel and beneficiaries of the official fuel tax policy. The government must impose additional duty on diesel cars to neutralise the effect of low tax diesel.

Says Anumita Roychowdhury, head of CSE’s air pollution team, “It is unacceptable that government should continue to incur huge revenue losses. With each litre of petrol replaced by diesel to run a car, excise earnings drop seven times. These losses will increase with the growing share of diesel cars and SUVs. The effect is so dramatic that the excise earnings from both diesel and petrol are now nearly equal.”

The Central government is estimated to have lost close to Rs 800 crore in fuel excise, just from the diesel used by the new diesel cars sold in 2010-11. From the on-road fleet the loss is staggering -- close to Rs 3,000 crore.

Even with the introduction of Bharat Stage III and IV fuels in April 2010, concerns over toxicity continue to rage. According to international regulatory and scientific agencies such as the World Health Organization, diesel particulates are toxic air contaminants and carcinogens.

The current emissions standards in India legally allow diesel cars to emit more particulate matter and nitrogen oxides. This will further worsen pollution levels that are fast deteriorating not only in big cities but also in smaller cities and towns of India. India is dieselising without clean diesel (diesel with 10 ppm sulphur diesel and advanced emissions control systems).

If the government fails to put the brakes in this budget, investment in diesel car facilities will continue. Car industry is now desperately reinventing to roll out more diesel models in small car segment as well. This would also make industry more resistant to emissions improvement and undermine the negotiating power of the regulator to push for tighter emissions standards. Cheap diesel for cars has to go, for all our sakes.

Other governments have taken fiscal measures to discourage diesel in cars. In Denmark, diesel cars are taxed higher to offset the lower prices of diesel fuel. In China, taxes do not differentiate between petrol and diesel. Sri Lanka has imposed very high duties (300 per cent) for diesel cars. Even in India, several official committees have asked for special and additional taxes on diesel cars to neutralise the incentive of cheaper diesel fuel.

CSE demands:
If freeing up diesel prices is a decision that is politically difficult to take, at least increase the tax on diesel cars to fully neutralise the incentives that diesel cars get from the low taxed diesel fuel. Or ban the use of diesel in cars.